PepsiCo: product innovation is the key to success

Global food and drink giant PepsiCo’s future success will hinge on it continuing to innovate, differentiate itself from the competition and raise its operational efficiency to grow its consumer base, according to the company's executive vice president.

Dr Mehmood Khan, who is also chief scientic officer, global research and development (R&D) at PepsiCo, said the company had undergone a radical transformation of its R&D activities to reflect the global, multicultural world in which it now operated, since he joined in 2007.

Although very important, its “cola business”​ now makes up only one-fifth of global turnover. With a turnover of around $70bn (£41bn), PepsiCo now has 22 brands valued at more than $1bn (£587M) each, which are sold in over 200 countries around the world, said Khan.

The company had to generate between $5bn (£3bn) and $6bn (£3.5bn) of new business each year to meet its 5–10% annual growth targets, “of which the majority has to come from innovation”.​

Not done enough ​

Speaking to our sister title Food Manufacture​ magazine after giving the annual Campden BRI lecture last month, Khan admitted that the food industry had not done enough to publicise the good it had done for society.

“We, as an industry, are very poor at telling our own story​,” said Khan. He cited the “tremendous amount of good”​ the food industry had done in providing people with good tasting, safe and affordable food.

Manufacturers needed to do more to get over the facts about what they were doing to reduce levels of sugar, fat and salt in food and drink, rather than slugging it out with critics over things such as obesity, where “emotion and facts get mixed up”​, he said.

Khan, who originally trained as an endocrinologist, also stressed the importance of not losing sight of what was important to consumers: they would not put up with loss of taste in healthy reformulation. And that was a challenge that PepsiCo was successfully managing, he claimed.

Reformulated products​

While choice would always be important, Khan argued that PepsiCo was carrying its consumers with it in reformulated products and by launching zero- and low-calorie drinks. PepsiCo's rising sales pointed to the success of this approach, he argued.

Since 2011, PepsiCo’s beverage business in the US alone had removed 370,000t of sugar from its products, he claimed.

“What we have been doing is to innovate the sugar out without changing the taste that consumers want,”​ he added. “I don’t need applause from the critics, I need my consumers to buy our product and that's happening.”​

Khan said: “We did the same with salt. Here’s my favourite statistic: a bag of ordinary ready salted single-serve Walkers Crisps today has less salt than a slice of white bread. It didn’t just happen. And yet when you ask the consumer to taste it, they don’t notice any difference.”​